Last week, the NFP missed expectations for a second time in a row and the previous numbers were all revised lower. This was seen as a disappointment as the labour market seems to be a touch weaker than previously expected. Nevertheless, the unemployment rate fell once again and lessened the disappointment from the miss in the payrolls number. The worse part for the Fed is that the average hourly earnings beat expectations, and such high wage growth is not consistent with a sustainable return to the 2% target. It’s worth reminding though, that the Fed will see another NFP report before the September meeting, so this NFP doesn’t change much, but the data leading into the meeting can still weigh on sentiment.
The RBNZ, on the other hand, kept its official cash rate unchanged while stating that it will remain at the restrictive level for the foreseeable future to ensure that inflation comes down back to target. The recent New Zealand inflation and employment data though surprised to the upside which might put some pressure on the central bank at the next rate decision, although they are more likely to keep rates steady.
NZDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the NZDUSD selloff from the 0.6389 resistance seems to be unstoppable as the US data remains quite strong. The sellers will have to break the 0.6050 support to target the break of the 0.5987 level next. The buyers, on the other hand, will need the price to break above the trendline to switch the bias from bearish to bullish and start targeting a rally towards the 0.6389 resistance.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is diverging with the MACD right when it’s approaching the 0.6050 support. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we may see a pullback all the way back to the downward trendline where the sellers will have an even better risk to reward setup to target the lows.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the support level and the divergence with the MACD. Aggressive buyers may start to pile in here with a defined risk below the level and target the trendline. The sellers, on the other hand, will want to see the price breaking lower to pile in even more aggressively and extend the selloff into the 0.5987 low.
Upcoming Events
This week the main event will be the US CPI report on Thursday. The market is likely to focus more on the Core readings as this is what the Fed is more interested in. Higher than expected data should give the US Dollar a boost as the market’s expectations will be skewed more on the hawkish side. On the other hand, lower than expected readings should weigh on the USD as it would support the soft-landing narrative in the short-term. At the same time of the US CPI data, we will also see the latest US Jobless Claims report, which is less likely to move the market since it’s released at the same time of the CPI, but big surprises should have an effect, nonetheless. Finally, we conclude the week with the University of Michigan Consumer Sentiment report on Friday where the market is likely to focus more on the inflation expectations figures.
